Ethereum: Dubious Speculation

Key Concepts

ETH/USD: Ethereum's price in US Dollars.
ETH/BTC: Ethereum's price relative to Bitcoin.
Bull Market Support Band: A technical indicator representing a historical support level for an asset during a bull market.
50-week Moving Average: A technical indicator that smooths out price data over the past 50 weeks, often used to identify trends.
Death Cross: A technical indicator where a shorter-term moving average crosses below a longer-term moving average, often signaling a bearish trend.
Macro Higher Low: A price low that is higher than the previous significant price low, indicating a potential uptrend.
Regression Band: A statistical tool used to model the relationship between variables and predict future values.

Ethereum's Recent Performance and Future Outlook

The video discusses Ethereum's recent price action, particularly its performance against both the US Dollar (ETH/USD) and Bitcoin (ETH/BTC). The speaker acknowledges that Ethereum experienced a deeper than anticipated downturn last week, prompting a re-evaluation of the market outlook.

Historical Ethereum Market Dynamics

The speaker reiterates their long-held view that Ethereum tends to outperform Bitcoin only after Bitcoin has completed its own upward cycle and begun to consolidate or decline ("goes home"). Historically, ETH/BTC has bled during Bitcoin's rallies, meaning holding Bitcoin would have been more profitable. However, Ethereum has historically bottomed against Bitcoin every few years, often coinciding with significant price bottoms against the US Dollar.

April's Shift in Strategy

For the first time this cycle, the speaker believed it was opportune to buy Ethereum in April, anticipating not only an increase in ETH/USD but also a rally in ETH/BTC. This prediction has materialized, with ETH/BTC rallying approximately 144% from its lows to its highs.

Rejection at All-Time Highs and ETH/BTC Top

Following Ethereum's crossing of its prior all-time high, the speaker predicted a likely rejection on the first attempt, which occurred. This rejection was also expected to correspond with a local top in ETH/BTC. Data presented shows that ETH/USD found a top around the week of August 18th, and ETH/BTC also topped out during the same week, validating this prediction.

Anticipated Pullback and December Bottom for ETH/BTC

The speaker anticipates a pullback in ETH/BTC. Their specific forecast is for ETH/BTC to print a "macro higher low" in early December. This prediction is based on historical data showing that ETH/BTC often forms its lows in the month of December. The speaker cites examples from 2015, 2016, 2017, 2018, 2019, and 2020, where December marked significant bottoms for ETH/BTC. While acknowledging that 2021 was an anomaly, the historical pattern is a key driver of this forecast.

The "Remember, Remember the End of December" Narrative

This December-centric prediction is linked to a famous video the speaker released on December 31st, 2020, titled "Remember, Remember the End of December." This video was created when ETH was bleeding against Bitcoin, but the speaker's analysis suggested a historical pattern of December bottoms followed by rallies.

Current ETH/USD and ETH/BTC Patterns

The speaker observes a similar pattern in ETH/USD: a move up, consolidation, and another move up, followed by the current consolidation phase. ETH/BTC exhibits a comparable structure: one move up, consolidation, another move up, and then consolidation. The expectation is that this consolidation in ETH/BTC will extend into December, potentially leading to another upward move thereafter.

Concerns and Re-evaluation: The Bull Market Support Band

A significant point of discomfort for the speaker has been Ethereum's breach of its bull market support band, prompting a re-evaluation of their outlook.

The Tesla Comparison and Potential Deviation

A comparison is drawn to Tesla's price action, which has shown a similar pattern of printing a low, then a macro higher low, followed by a rally. Tesla's rally saw its price increase significantly, then retrace to a lower level before recovering. The speaker questions if Ethereum must also retrace to a similar low (e.g., $2100). While not their base case, they consider it.

The speaker differentiates Ethereum's potential path from Tesla's by noting that Tesla remained strong into December after its April low. Since Ethereum's low was also in April, the speaker is choosing to believe that Ethereum might deviate from the Tesla pattern and remain strong into December.

Ideal Scenario: Bitcoin Above 50-week Moving Average

In an ideal scenario, the speaker envisions Bitcoin remaining above its 50-week moving average, allowing Ethereum to have one final rally to end the cycle.

The "Sign" for Exiting: Bitcoin Below 50-week Moving Average

The speaker's definitive signal to exit the market for this cycle would be two consecutive weekly closes by Bitcoin below its 50-week moving average. Until this occurs, they remain open-minded to their base view of Ethereum achieving another rally to an all-time high.

Length of Consolidation: Tesla vs. Ethereum

The speaker analyzes the duration of consolidation. Tesla's consolidation after its rally lasted 12 to 16 weeks before finding a low. For Ethereum, the current consolidation, starting from its August high, has lasted approximately 11 weeks. This suggests Ethereum is nearing a point where Tesla began its consolidation phase. The speaker also notes that Tesla, despite its significant retracement, has since rallied back to all-time highs.

Double Bottom Scenario for Total Market Cap (Excluding USDT)

The speaker suggests a "perfect" scenario for the total market cap (excluding USDT) divided by Bitcoin. They envision this chart double-bottoming, with a drop, a low, a bounce, a double bottom in December, and then a subsequent higher bounce. This scenario would ideally occur during a Bitcoin rally, not a dump.

The "Dubious" 2017 Bitcoin Analogy

A "dubious" but optimistic way to look at Ethereum's current situation involves a comparison to Bitcoin's price action in 2017. Bitcoin rallied to approximately $4,900 and then found a low around $3,000 before rallying again. Ethereum's recent high was also around $4,900. Ethereum has since dropped to around $3,058 (varying by exchange). If this pattern holds, Ethereum might find support around the $3,000 mark.

Potential Risks: Death Cross and Bitcoin Dump

The speaker acknowledges the possibility of Bitcoin rolling over into an upcoming "death cross," which could spook Ethereum again. However, they also note that Bitcoin is not "supposed" to dump into a death cross and could rally into it.

Final Rally and Cycle End

If Ethereum experiences another rally, the speaker believes it will be the final rally of the cycle. They are not willing to declare the cycle over until Bitcoin shows multiple weekly closes below its 50-week moving average.

Base Case: Return to Regression Band in 2026

The speaker's base case for the future involves Ethereum achieving a rally to a new all-time high, followed by a return to the regression band in 2026, and then building for the next cycle.

Drop Depth and Bull Market Support Band

The speaker admits to being wrong about the depth of Ethereum's drop, which exceeded their initial 30% expectation, reaching approximately 38%. They also point out that Ethereum has historically dipped below its bull market support band and still managed to rally to new all-time highs, and has also recovered to above it. This indicates that breaching the band is not necessarily a definitive end to a bull cycle.

Conclusion

The speaker remains cautiously optimistic about Ethereum's potential for one more rally to an all-time high, contingent on Bitcoin's performance and avoiding multiple weekly closes below its 50-week moving average. The key period for a potential bottom in ETH/BTC is anticipated to be December. The speaker emphasizes the importance of observing Bitcoin's behavior relative to its 50-week moving average as the primary indicator for the end of the current cycle.